Former economy minister accepts blame for Argentina's ``extreme anguish''

Thursday, December 27th 2001, 12:00 am
By: News On 6

BUENOS AIRES, Argentina (AP) _ Ousted last week amid violent street protests against his economic policies, Argentina's former economy minister apologized to Argentines on Thursday for failing to end nearly four years of bitter recession and plunging them into ``extreme anguish.''

Domingo Cavallo accepted blame after months of defending his belt-tightening polices as necessary to pay off Argentina's $132 billion public debt and defend the peso's 10-year-old link to the dollar.

``I ask forgiveness because when you try to solve problems, obviously you make mistakes,'' Cavallo said in interviews with a local television station and the daily Clarin. ``They result in unwanted effects that harm the people.''

Cavallo, who took office last March, acknowledged that his failed policies were to blame, but he said the street protests had not been directed just at him or then-President Fernando de la Rua, but ``against all Argentine leaders.''

Cavallo's policies have sent Argentines' confidence in their government and banking system into a tailspin.

After a run on banks Nov. 30 that saw $2 billion yanked in a single day, Cavallo imposed a partial banking freeze, limiting cash withdrawals to $1,000 a month. Thousands poured onto the streets, some to protest, others to loot.

In the interview with the Clarin newspaper, though, Cavallo defended the bank freeze as ``inevitable.''

Without the freeze, ``people would have lost their savings, there would have been hysteria,'' he said. ``No banking system in the world can pay out in cash all its deposits.''

He said he had spoken with new, interim President Adolfo Rodriguez Saa, whom he called ``a really brave man'' and wished him luck, although the two men differ sharply on their economic policies.

Immediately after taking office Sunday, Rodriguez Saa, who belongs to the left-leaning Peronist Party, declared a suspension on foreign debt payments and announced a public works program to create 1 million jobs.

On Wednesday, Rodriguez Saa announced that a new currency, the Argentino, would start circulating in January alongside the peso and the dollar, which is widely used here.

Many Argentines fear the introduction of another currency without the firm backing of foreign reserves is a prelude to an all-out devaluation that could plunge the country back into hyperinflation that in the 1980s reached 5,000 percent.

Cavallo said a devaluation could be avoided if a debt swap he started is completed, if the government ``prints prudently'' and if neighboring Brazil allows Argentina to protect its local industry by charging duties on Brazilian imports.

Currently, trade barriers between the two neighbors are minimal as both belong to Mercosur, a regional trade bloc.

Also speaking on television Thursday, former President Carlos Menem, who first chose Cavallo as economy minister in 1991, said he had met with Rodriguez Saa and had urged him not to devalue or lead Argentina into international isolation.

``We agreed about not devaluing the currency and we also spoke about the need not to isolate Argentina from the rest of the world,'' said Menem, who privatized much of Argentina's economy but failed to rein in government spending during 10 years in office.

Urging Argentines to pull together, Menem said ``in this moment the success or failure of this government means the success or failure of the country.''